Ways to avoid paying interest on credit cards

Learn about credit card interest and how to help avoid or reduce it when using a credit card.

Mobile phone showing interest charges.

How does credit card interest work?

Credit card interest is applied, according to the credit card term agreement, if you are unable to pay your statement balance in full by the end of your billing cycle.

Credit card grace period

A credit card grace period is the time period that you have to pay off your bill before an interest charge is applied to your balance. If you pay your bill during this timeframe, you will not be charged interest.

When do credit cards charge interest?

Your balance will start accumulating interest if you do not pay your monthly balance in full. This will cause you to lose your grace period on your credit card. Any new charges you accumulate during that billing cycle, along with your current balance will begin accruing interest.

Ways to avoid credit card interest

  • Understanding your credit card statements and interest charges can be overwhelming and confusing. Be sure to review the interest rate, statement balance and current balance.
  • Paying off your statement balance (the amount from your last statement cycle) each month.
  • Paying off the current balance (the amount of all up to date transactions) will also help you to avoid paying interest.
  • Reviewing your statement a few times a month to make sure you’re staying within your monthly budget.
  • Making multiple payments to your balance throughout the month. Your overall interest is calculated by your balance, so when you make payments throughout the month this will help reduce the interest.

Reduce credit card interest

Sometimes we don't have the luxury of paying enough of the balance to avoid interest. At those times, there are strategies to help keep your interest rate lower.

  • Pay at least the minimum payment due to reduce the amount of interest charged.
  • Make a payment on or before the due date shown on the statement.
  • Explore credit cards with lower interest rates and fees.
  • Explore balance transfer options to help reduce the interest rate you pay.
  • Try to avoid charging medical expenses to your credit card. Instead, contact your doctor or hospital’s billing department to check if they have interest-free payment plans available.

Use your credit card wisely

Being mindful of your credit card use can be done in many ways. Here are a few:

  • Stick to a budget. Only spend what you can afford.
  • Build your credit score by obtaining and using your credit cards.
  • Minimize using your credit card and use the debit feature when possible.
  • Track your expenses and only spend what you know you can pay off each month.
  • Review your credit card expenditures every month and follow up on any errors you may find on your statement.
  • Pay off the balance when possible.
  • Set up auto pay from your bank to make sure the credit card bills are paid on time.

Make smart credit decisions

Poorly managed credit cards can result in wasted money and can grow into a bigger problem by damaging your credit scores. Become knowledgeable about your credit report, credit score and credit bureaus. Regularly monitor your credit report to identify and take steps to rectify issues.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Neither State Farm nor its agents provide tax or legal advice.

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